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David Sirota

David Sirota

Posted: May 31, 2006 04:25 PM

Why We Should Worry About the Hostile Takeover of America's Court System


It's easy to forget what Supreme Court nomination fights really mean once they are over. They come along every few years, there's a whole media circus around them that focuses only on hot-button social issues, and then, typically after Democrats roll over and die, there's little - if any - recollection of what it all meant, except in the few cases where the hot-button social issues actually come before the court, and they don't usually come up for years, so by that point, everyone has long forgotten which President or political party was responsible for the nominations that swung the court.

What gets buried in this cycle, of course, is the fact that the Supreme Court exerts itself most forcefully on the key financial and corporate power issues - the issues that engineer who are winners and who are losers in America's economy. As I pointed out during the last year's debate over whether to confirm corporate lawyer John Roberts as chief justice, corporate issues are now a major focus of the court. "The Supreme Court's rulings on abortion and religion capture the headlines, but much of the business before the high court deals with the conduct of business," noted Knight Ridder at the time. "In the court's term that ended this week, for instance, about 30 percent of the rulings involved business issues."

That's why Big Business took such an interest in Supreme Court nominations, directly coordinating with the White House to vet potential nominees. That's why Corporate America salivated when Bush nominated Roberts - Big Money's "go-to lawyer," according to his associates. That's why wealthy executives cheered when Bush later nominated Sam Alito, the guy Businessweek noted "consistently has come down on the side of limiting corporate liability, limiting employee rights, and limiting federal regulation." And sadly, that's why the confirmation hearings carefully avoided serious discussion about the economic issues. It's all because Big Business and their bought-off politicians understand the advantage they get by infiltrating the inside of the court with their vermin. They understand, in short, the private profit potential of performing a hostile takeover of America's court system.

The result is that the Court is becoming even more complicit in helping Big Money interests transform the legal system into the sharp, poisoned-tipped arrowhead of Big Business's profit spear - rather than a shield protecting America's citizens. This has come into especially stark relief over the last few weeks.

First, the Supreme Court overturned a lower court ruling that would have invalidated many of the most egreiously wasteful taxpayer-funded subsidies to already wealthy corporations. Ohio taxpayers made the compelling case that these subsidies illegally rig interstate commerce. The court responded not only by overturning the lower court's ruling, but actually stripping all taxpayers of ever bringing similar suits in the future, thus cementing these corporate giveaways in stone.

Remember, these are giveaways - and often come with horrific consequences. As Greg LeRoy documents in his explosive book The Great American Jobs Scam, these subsidies often cost taxpayers billions, force taxpayers to sholder the burden with higher taxes, and never compel companies who are benefitting from the largesse to actually deliver on their promises of jobs and better wages. We saw this recently when New York politicians of both parties eagerly handed Goldman Sachs - one of the wealthiest companies in the world - millions in taxpayer-funded loans/bonds to finance the investment bank's palatial new headquarters, all at a time when the state/city governments were saying they had to slash transit workers benefits.

Then, just this week, the Los Angeles Times reports the court "restricted the free-speech rights of the nation's 21 million public employees Tuesday, ruling that the First Amendment does not protect them from being punished for complaining to their managers about possible wrongdoing." The ruling is extremely far-reaching in that "it applies to governments at all levels, including federal and states agencies, public hospitals and public schools and colleges." It is also outrageous.

Consider, for instance, someone working at the Pentagon who finds out that Halliburton or another politically connected contractor is illegally bilking taxpayers, as we know these contractors have in the past. That's right - if that person tells their superiors about the illegal behavior, they can be fired. And remember - this decision was brought to you specifically by Roberts and Alito. "In October, the justices first heard the case, but they were apparently split 4-4," the Times noted. It was reargued in March, and the two new justices cast the deciding votes in the split decision.

Now, in a story buried in the business press but barely reported anywhere else, we find out that the Roberts court is considering limiting punitive damages against the worst corporate abusers. Specifically, the Financial Times notes that the court said "it would review a $79 mllion award won by the widow of a former smoker against Philip Morris, the big cigarette maker." However, "the case reaches far beyond the world of tobacco, and could test the justices’ determination to restrict the size of damage awards that juries can impose against a wide range of businesses." The paper goes on to note that "the U.S. Chamber of Commerce has tried repeatedly to persuade the justices" to limit punitive damages - and since the White House allowed the Chamber of Commerce to vet potential Supreme Court nominees, the Chamber is now expecting to get its way.

Why is this important to citizens? I have a whole section on this in my new book, Hostile Takeover. Here's an excerpt that should spell it out:

"Though bought-off politicians like to regurgitate the line that punitive damages are supposedly skyrocketing and thus hurting business, the numbers tell the opposite story. They were only awarded in 6 percent of all trials, and averaged just $50,000. That's actually an outrage - punitive damages are intended not as compensation to a victim, but as punishment to big companies so they don't misbehave again, meaning punitive damage rulings have to be big in order to make an impact. For many large companies, $50,000 is barely a rounding error...Remember, these are the awards above and beyond what an individual gets for their tribulations. They are the punishments that make sure the guilty company does not do what it did again. That means in many cases punitive damages have to be large in order to make a company get the point. If they are too small, the company will know it can continue such misbehavior, and simply chalk up the verdicts as minor costs of doing business. That does no good. Think about it this way – let's say you are parking your car at the airport. If it costs $10 to park in the lot that's far away, but a parking ticket is only $5 for parking illegally right in front of the terminal, there would be no incentive for you not to break the law. In fact, there would be every incentive for you to break the law. That's the same thing that happens when punitive damages are limited. Companies can often have a financial incentive to abuse people, because the cost to them if they get caught – the punitive damages – are less than the amount they make by misbehaving."
Rest assured this hostile takeover of our legal system by Big Money interests is not going to stop. All you have to do is look at Delphi to see the outlines of what's next. As Businessweek reported, the company is trying to get the court system to rubber stamp its plan to give executives roughly $98 million in new bonuses while terminating previously negotiated labor contracts and demanding huge wage cuts from workers. The move is part of an overall strategy "to use the bankruptcy courts to drastically slash Delphi's U.S. presence, thus freeing it up to focus on its already vast overseas production." This, of course, says nothing of the outright corruption spreading within the court system. Nathan Newman documents how the revolving door between the bench and the corporations the bench is supposed to regulate is spinning faster than ever. Similarly, the Washington Post last week uncovered evidence that organizations providing "free trips to hundreds of federal judges received large contributions from tobacco, oil and other corporate interests" - reminiscent of cash-in-envelope payoff schemes in eras past, and a problem we know goes all the way up to people like Supreme Court Justice Antonin Scalia.

So the next time you Supreme Court nomination fights and legal battles in general are all about hot-button social issues, splash some cold water on your face and resist the media propaganda that is trying to distract you from what's really going on. Our court system is under attack - and though that attack may fly under the radar, it is very real, and it is destroying the last pillars of economic security this country worked so hard throughout history to achieve.